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IRS to Fix Problem with Automatic Tax Levies

The Internal Revenue Service plans to fix a glitch that was discovered with its system for issuing tax levies that allow it to seize the assets of delinquent taxpayers.

When taxpayers do not pay their delinquent taxes, the IRS has the authority to work directly with financial institutions and other third parties to seize taxpayers’ assets as part of a tax levy. The IRS Restructuring and Reform Act of 1998 requires the IRS to notify taxpayers of the intent to levy at least 30 calendar days before initiating any levy action to give taxpayers an opportunity to formally appeal the proposed levy.

“Taxpayers’ rights are potentially violated if they are not notified within the 30-day period and a levy is issued,” said a new report issued Tuesday by the Treasury Inspector General for Tax Administration.

TIGTA is responsible for annually determining whether the IRS complied with the IRS Restructuring and Reform Act of 1998 requirement to notify taxpayers prior to issuing levies. In its fifteenth annual audit report on this subject, TIGTA determined whether the IRS has complied with law providing for a notice and opportunity for a hearing before a levy is issued. The report found that the IRS is protecting most taxpayers’ rights when issuing systemically generated and manually prepared levies.

TIGTA reviewed 15 systemically generated and 30 manual levies identified through the IRS’s Automated Collection System and determined that controls were effective to ensure that taxpayers were given notice of their appeal rights at least 30 calendar days prior to the issuance of the levies.

In addition, TIGTA reviewed 27 systemically generated and 18 manual levies identified through the Integrated Collection System and determined that taxpayers were given notice of their appeal rights at least 30 calendar days prior to issuance of the levies. However, three systemically generated levies had additional tax assessments in which a new notice of intent to levy was not sent prior to issuing the levies, as required, TIGTA noted.

TIGTA recommended that the IRS determine the feasibility of updating the systemic Integrated Collection System programming to prevent levies from being issued on modules in which a new notice of intent to levy has not been sent after there has been an additional assessment.
IRS officials agreed with the recommendation. The IRS plans to continue to implement a change to the Integrated Collection System programming for systemic levies to prevent levy issuance on modules where an additional assessment had been made and a new Notice of Intent to Levy/Notice of a Right to a Hearing has not been sent to the taxpayer.

“We initiated efforts to update the Integrated Collection System (ICS) to address the required levy notices on subsequent assessments,” said IRS official Ruth Perez, writing on behalf of Faris Fink, the commissioner of the IRS’s Small Business/Self-Employed division. “In addition, we will provide training on this topic to revenue officers during this year’s Continuing Professional Education.”